Statement by the Acting Managing Director to the International Monetary and Financial Committee on Progress in Reforming the IMF and Strengthening the Architecture of the International Financial System
April 12, 2000

Progress in Strengthening the Architecture of the International Financial System
March 30, 2000

Report of the Acting Managing Director
to the International Monetary and Financial Committee on Progress in Reforming the IMF
and Strengthening the Architecture of the International Financial System

Report of the Acting Managing Director
to the International Monetary and Financial Committee on Progress in Reforming the IMF
and Strengthening the Architecture of the International Financial System

1. This report provides an update on progress in
strengthening the architecture of the international financial system, focussing
on the various steps taken in key areas―both by the IMF and by
others—since the Managing Director’s report in September 1999.

2. In the aftermath of the recent financial crises, broad international
agreement has been reached on a number of key measures to ensure a more
resilient international financial system. Many initiatives have already
been implemented or are currently being made operational. In several
areas—such as enhancing transparency and accountability, assessing
standards and codes, and better identifying financial sector
vulnerabilities—pilot programs are underway. These efforts are
experimental and designed to set the stage for decisions on longer-term action.
Work on developing and disseminating standards is focussing increasingly on
facilitating implementation through the provision of technical assistance and
work is underway to develop better analytical tools and data for the assessment
of vulnerability.

3. In other areas—such as capital account liberalization, exchange
rate systems and involving the private sector in crisis resolution, progress
has been made and discussions continue. Given their importance, momentum in
these areas should not be allowed to dissipate.

4. Many of these initiatives come together through the vehicle of IMF
surveillance. But tensions between transparency and confidentiality, and
between comprehensiveness and selectivity, need to be balanced. Bringing these
initiatives into the surveillance process also has important resource
implications. In addition, there is a need for new ways of cooperating with
other institutions and agencies, in order to better inform IMF surveillance by
drawing on work undertaken elsewhere.

5. The changes in the global economy that have led to these initiatives on
financial architecture also have possible implications for other IMF
operations. A major review of IMF financial facilities has begun in order
to assess the extent to which the ways in which the IMF provides financial
assistance to its members may need to be modified in light of these
changes.

6. The IMF’s efforts are part of a coordinated and comprehensive
response from the international community. A range of international
institutions and fora are playing major roles in efforts to strengthen the
international financial architecture, including the World Bank, the Financial
Stability Forum (FSF), the Bank for International Settlements (BIS), other
Basel-based groups, and the Organisation for Economic Cooperation and
Development (OECD). In addition, the efforts of the international
standard-setting bodies—such as the International Organization of
Securities Commissions (IOSCO), the International Association of Insurance
Supervisors (IAIS) and the various accounting bodies1—and of fora such as the United Nations
Commission of International Trade Law (UNCITRAL), have become increasingly
important given the heightened focus on assessments of financial stability and
on the development and observance of standards.

7. The implementation of decisions taken in the last year on poverty
reduction and social sector issues is an essential complement to efforts to
strengthen the global financial architecture. The renewed impetus given to
these areas under the Poverty Reduction and Growth Facility (PRGF) and the
enhanced HIPC Initiative are critical to better integrate the poorest countries
of the world into the global economy. Properly designed and sequenced trade
liberalization is an important component of these efforts to foster growth
and reduce poverty.

8. This paper is organized as follows: Section II below discusses progress in
strengthening IMF surveillance. Section III discusses private sector
involvement in crisis prevention and resolution. Section IV reports briefly on
the early discussions of IMF facilities. Detailed information on progress
across the range of initiatives aimed at strengthening the international
financial architecture is summarized in tabular form in Appendices I, II and
III.

9. To remain effective, IMF surveillance has to adapt continuously to new
global realities, including those presented by the rapid evolution and growing
integration of world financial markets. The focus of surveillance must be
defined in terms of the IMF’s responsibility for the promotion of
external sustainability of its member countries. Of primary interest are issues
related to the sustainability of a country’s balance of payments; its
overall macroeconomic developments and policies, including monetary, fiscal and
exchange rate policies; and issues that bear on vulnerability to crises
(including, inter alia, financial sector issues, the current account balance,
and capital account flows and stocks). The analysis of each country’s
situation often needs to be set in a regional or, for systemically important
countries, in a global context. The boundaries of surveillance need to remain
flexible to take account of the changing economic and institutional environment
and the different circumstances facing countries. However, the farther the
issues facing a country move beyond these key areas, the more the IMF’s
involvement needs to be assessed explicitly in terms of the macroeconomic
relevance of the issues.

10. In reviewing the IMF’s surveillance activities for the period
1997-99 (the Biennial Review of Surveillance2), the Executive Board reiterated that surveillance must encompass
analyses of financial sector soundness, capital account issues, and
vulnerability to crises. The Board also emphasized that surveillance must
be informed by timely, comprehensive and accurate data, and called for more
candid assessments of data deficiencies. The Review noted that, in line with
efforts to ensure a comprehensive discussion of relevant issues, private market
views are increasingly being used to inform surveillance; the coverage of
exchange rate policies has been strengthened through the use of more
sophisticated analytical techniques; and policy advice has become more candid.
There has also been progress in integrating regional and global issues into
bilateral surveillance, and cross-country themes have come to play a more
prominent role.

11. Reform initiatives have also begun to influence the conduct of
surveillance. In particular, surveillance is being influenced by
efforts:

to improve transparency and accountability of the IMF and its members;

to develop and disseminate international standards in the areas of direct operational concern to the IMF;

to undertake assessments of members’ observance of these standards and
codes as well as of other relevant international standards and codes by drawing
on assessments undertaken by the World Bank and other standard-setting bodies;
and

12. Many of these initiatives are currently in a pilot phase. Over the
course of the coming year, the Executive Board will review these pilots and
consider how they can best be incorporated into the surveillance process. An
important issue is to determine how best to draw on the ongoing work and
special expertise of other institutions to inform IMF surveillance. The
Executive Board will return to this and other issues, including those arising
in the internal and external evaluations of surveillance, in the work program
to be developed for the remainder of the year.

13. Greater transparency in the IMF’s assessments of members’
policies is intended to improve the effectiveness of surveillance and
Fund-supported programs and to enhance public dialogue on members’
policies. Providing the public and financial market participants with more
information, including on the details of governments’ commitments under
IMF-supported programs, can also contribute to a wider policy debate, enhanced
ownership of the reform process, and sound investment decisions. However, these
benefits must be balanced against the IMF’s role as confidential policy
advisor to members and the need to maintain the quality and candor of staff
assessments and policy advice.

14. Several initiatives have been launched to improve the transparency of the
IMF’s operations and its policy advice, including:

the active encouragement of the release of Public Information Notices (PINs) following Article IV consultations;

the establishment of a presumption to release Letters of Intent (LOIs), Memoranda of Economic and Financial Policies (MEFPs);

the release of staff assessments of members’ Poverty Reduction Strategy Papers (PRSPs)—it is envisaged that the country-owned PRSPs will also be published;

the release of the Chairman’s Statement following Executive Board discussions on the Use of Fund Resources (UFR);

15. The implementation of these transparency initiatives has progressed
significantly over the last eighteen months. The Executive Board will soon
review, inter alia, the experience with issuing Chairman’s statements
following UFR discussions and reviews, the experience with the release of
Article IV PINs, and publication of LOIs/MEFPs. It will again consider the
possible release of UFR PINs and stand-alone UFR staff reports, and the
experience with the pilot program allowing the voluntary public release of
Article IV staff reports will be reviewed in coming months.

16. The commitment to increased transparency has also underpinned measures
to explain better the IMF’s work to the wider community. Steps have
been taken to increase the provision of information to the print media and to
the public. Further efforts are being made to achieve greater outreach to civil
society, strengthen the IMF’s publication program, and to increase
dialogue with the private financial sector. The Executive Board has welcomed
the implementation of a number of elements of a strategy for strengthening the
IMF’s external communications, based on the review by external
consultants completed in 1999.

17. The discussion on strengthening the international financial architecture
has emphasized the need to develop and implement internationally recognized
standards and codes of good practice. The development and adoption of
standards in areas central to economic and financial system stability can
contribute to better informed lending and investment decisions, increased
accountability of economic policy-makers and private sector decision-makers,
and improved economic performance.

18. Following the development of standards in areas of direct operational
concern to the IMF—data dissemination, transparency of fiscal,
monetary and financial policies, and banking supervision—efforts
have increasingly focused on the dissemination and implementation of these
standards, including through the provision of technical assistance.
Significant progress has also been made in preparing material to assist
countries in the implementation of standards. A manual to assist in the
implementation of the Code of Good Practices on Fiscal Transparency has
been available for some time. The IMF is in the final stages of preparing a
supporting document to the Code of Good Practices on Transparency in
Monetary and Financial Policies (MFP Transparency Code) to help guide
members in their implementation of the Code. The operational guidelines for the
data template on international reserves for the SDDS will be finalized by
year-end after taking into account members’ experience in its
implementation.

19. The experience with the use of standards also needs to be reviewed
periodically in order to ensure that their design and implementation remain
appropriate. The Executive Board has recently reviewed the experience with
the Special Data Dissemination Standard (SDDS) and the General Data
Dissemination System (GDDS) and agreed upon changes in their design in areas of
international reserves and external debt (Box 1). The Board will also shortly
discuss the provision by members of external debt and international reserves
data to the IMF for its surveillance activities, drawing on the decisions taken
for the SDDS and GDDS. The Board will shortly review the experience with
assessments of the implementation of the Basel Core Principles (BCP),
and later in the year it will review the experience with assessments of the
Code of Good Practices in Transparency in Monetary and Financial Policies.
The Basel Committee on Banking Supervision (BCBS) has recently approved a
Basle Core Principles methodology—prepared with input from the IMF
and World Bank—designed to allow bank supervisors or external groups to
review adherence to the BCP. The BCBS is continuing to work on its Core
Principles and is hosting a workshop in May to consider the results of
assessments done to date and to consider the possibility of updating and
revising the principles. Work is also underway in other international fora to
further develop and refine standards in areas such as securities regulation,
insurance regulation, accounting and auditing, and payments systems. The
current state of play in these areas is described in more detail in Appendix
III.

The Executive Board has recently considered the Third Review of the
Fund’s Data Standards Initiatives which concluded that substantial
progress was being made in meeting the requirements of the SDDS. It is expected
that most subscribers will be in observance of the SDDS by end-June, and
systematic monitoring of observance of the Standard is to begin at that time.
The GDDS—targeted toward countries not in a position to subscribe to the
SDDS and seeking to make improvements in their statistical systems—is now
moving into its operational phase.

To strengthen the provision of data for the assessment of external
vulnerability the Executive Board has approved the use of a standard format for
the dissemination of data on official reserves and foreign exchange liquidity,
based on the SDDS reserves template approved last year. Template data are to be
distributed in this format on the IMF’s external website.

The Executive Board has also agreed to the introduction of a separate SDDS
data category for external debt statistics involving the dissemination of
comprehensive and timely data broken down by major sectors, on a quarterly
basis. This will be phased in over a three year transition period.

There will also be an enhancement of the GDDS in the case of external debt,
with public and publicly guaranteed debt and the associated debt service
schedule in the core data category of the GDDS.

The review of data standards also took up the issue of data quality and
staff is extending earlier work on a framework for the systematic assessment of
data quality. In addition, a Data Quality Reference Site has been established
on the Dissemination Standards Bulletin Board to foster a common understanding
of data quality, drawing on contributions from the international statistical
community.

The Executive Board has requested that the staff prepare quarterly reports
covering the status of subscription and observance of the SDDS, along with
other important developments in the Standard. Staff have been asked to explore
the possible modalities for including references to countries’
subscription to the SDDS in Article IV staff reports and PINs, including how
observance should be discussed in these reports.

20. In earlier discussions, the Executive Board has supported the view that
IMF surveillance needs to take into account the extent to which standards are
observed as part of efforts to evaluate whether member’s institutional
structures and policy practices are consistent with economic and financial
stability.3 While the adoption
of any individual standard is voluntary, the international community has also
recognized the importance of information on the extent to which countries
implement standards and codes. It has called for the IMF, in collaboration with
the World Bank and other standard-setting bodies, to prepare reports assessing
the extent to which members observe internationally recognized standards and
codes. How this work will be formally incorporated into IMF surveillance
remains to be decided. However, support for the preparation of these
"transparency reports"—now referred to as Reports on the
Observance of Standards and Codes (ROSCs)—has been wide ranging and
an experimental program has been underway since early 1999 (Box 2).4

21. There is a critical distinction, however, between undertaking
assessments of a member’s observance of particular standards and
using those assessments in IMF surveillance. The former requires
detailed knowledge of the relevant standards and the expertise to use this
information to benchmark individual country practices. The latter involves an
appreciation of how these practices have been changing over time and how they
affect economic and financial system stability.

22. The Executive Board has stressed that, in undertaking assessments, staff
should concentrate primarily on those areas within the IMF’s direct
operational focus. However, Directors also stressed the importance of
assessing standards in other areas. In these areas, the task of undertaking
assessments must draw on the skills of other expert bodies. To that end, the
Executive Board has endorsed a shared ownership approach to the
preparation of ROSCs whereby different international institutions take primary
responsibility for undertaking assessments in different areas, in line with
their mandates and expertise. The World Bank has agreed to join the IMF in
co-preparing ROSCs and is now experimenting with assessments in the areas of
corporate governance and accounting.

23. Even working jointly, there are limits to what standards the IMF and
World Bank can assess. Other international financial organizations,
standard-setting bodies, and national authorities all have roles to play if the
international community is to assess effectively the range of standards
necessary to promote financial stability. Mechanisms need to be developed to
involve a wider range of institutions and standard-setting bodies in the
assessment process. In that regard, the joint World Bank-IMF Financial
Sector Assessment Program (FSAP) has been particularly effective in
bringing the expertise of national agencies and standard-setting bodies to the
assessment process (see Section D below).

24. Article IV surveillance provides the appropriate framework within which
to organize and discuss the implications of assessments with national
authorities although the modalities by which this is done remain experimental
during the ROSC pilot. The extent of progress made in implementing and
observing standards can be reviewed, and the implications for macroeconomic and
financial vulnerability can be examined, in the course of consultation
discussions.In endorsing the modular approach to the preparation of
ROSCs— whereby standards are assessed separately, building over time into
a comprehensive set of assessments—Directors observed that this would
provide a suitable and flexible mechanism with which to incorporate information
on standards into the surveillance process.

25. Linking the monitoring of standards and codes to the IMF’s Article
IV consultation process—with its near universal coverage and
uniformity of treatment—can help ensure a continued focus on
promoting the implementation and observance of standards. A comprehensive
range of assessments will also be valuable for the World Bank’s work in
helping countries determine reform and development priorities. Similarly,
feedback from the assessment processes can help standard setters identify the
strengths and weaknesses in existing standards and provide insights for future
work. In the event that assessments are published, this should also assist
markets in making better-informed lending and investment decisions which
should, in turn, encourage greater efforts to implement, and adhere to,
standards.

26. Prior to the 2000 Annual Meetings, the IMF Executive Board will review
the experience with the three rounds of experimental ROSCs. Staff will also
discuss the usefulness of the evolving approach, and limitations to
assessments, with the private and public sectors. In addition, the FSF
Working Group on Offshore Financial Centres (OFCs) has recommended that the
IMF organize assessments of the observance of standards by OFCs as part of a
five stage process involving assisted self-assessment and independent
assessment (Appendix II). The Executive Board will shortly consider a staff
paper on the IMF’s involvement with OFCs.

BOX 2: A Framework for Experimental Assessments of the
Observance of Standards

The IMF and World Bank have developed an organizing framework to undertake
assessments of the observance of standards in cooperation with national
authorities and other international bodies. Assessments are prepared using a
range of different instruments.

(i) The joint IMF-World Bank Financial Sector Assessment Program
(FSAP) has as its primary focus the assessment of financial sector
vulnerabilities and the identification of developmental priorities, which
involves, in part, an assessment of those financial sector standards
which are the key to stability in that particular case. All FSAPs assess
observance of the MFP Transparency Code and the BCP. The FSAP is a
collaborative effort involving expert support provided by a range of national
agencies and standard-setting bodies (including IOSCO and IAIS).

(ii) Assessments of adherence to data dissemination and fiscal transparency
standards are undertaken in the context of the IMF’s existing technical
assistance activities and in stand-alone exercises in the context of
surveillance and program reviews.

(iii) The World Bank, in cooperation with other bodies, is beginning to
experiment with assessments in the areas of corporate governance and accounting
and is currently developing modalities for conducting assessments.

The IMF-World Bank Reports on the Observance of Standards and Codes
(ROSCs) provide a framework to assemble assessments of standards across the
range of areas for which they are currently being conducted, including those
financial sector standards assessed in the context of the FSAP, the assessments
covering data dissemination and fiscal transparency and, shortly, corporate
governance and accounting as the World Bank, in cooperation with other bodies,
begins to experiment with assessments in these areas.

Experimental ROSC modules provide a description of country practice in a
particular area along with an assessment of the extent to which these practices
are consistent with the relevant standard. A range of ROSC modules covering 15
industrial, emerging market and developing economies have now been prepared by
IMF staff in conjunction with national authorities for countries that have
volunteered to participate in the pilot program. Modules are currently being
prepared by IMF staff, in conjunction with national authorities, for another 18
countries. World Bank staff plan to have prepared around six corporate
governance modules by mid-2000 and around the same number of accounting modules
by end-September. Publication of the ROSCs has remained at the discretion of
the national authorities although the majority of completed assessments have
been made available on the IMF’s external website at
http://www.imf.org/external/np/rosc/rosc.asp.

Self-assessments of the observance of standards provide an important
complement to external assessments. Self assessments can help promote ownership
by national authorities and, if based on clear and well-developed
methodologies, can help make more effective use of scarce international
resources. In the absence of external assessments, though, self assessment may
lack credibility and rigor. Clear and well understood assessment methodologies
– "how to" manuals – are critical to help guide the
self-assessment process, ensure complementarity between self and external
assessments and facilitate comparability across jurisdictions. Greater
international support for efforts underway by standard setting bodies to
develop assessment methodologies (see section II.B above) would help encourage
adoption of standards. Market and official incentives can also play a
significant role in boosting the commitment of countries to implement
standards.

27. Recent episodes of financial crisis in a number of countries and cross
border contagion have underscored the need to strengthen countries’
financial systems and, in particular, to improve abilities to identify
financial sector risks and vulnerabilities at an early stage. The IMF has,
for some time, given prominence to financial sector issues in its surveillance
and lending. Despite a considerable improvement in the coverage and assessment
of financial sector soundness, there is a need for more in-depth analysis in
this area, with better discussion of possible gaps in information and analysis.
The priority is to focus systematically on the health of financial systems and
identify the interlinkages among macroeconomic policies, the real economy and
structural and developmental issues in the financial sector. To carry out this
work most effectively, and to utilize scarce expert resources efficiently, this
work in being carried out in collaboration with the World Bank.

28. The joint IMF-World Bank Financial Sector Assessment Program
(FSAP)—introduced on a one-year pilot basis during 1999—is
intended to be the core instrument in the IMF and the World Bank for providing
this more focused financial sector analysis. The FSAP, which operates in
the context of Article IV consultations, is designed to underpin a more
effective dialogue with national authorities, to help countries reduce
vulnerabilities within their financial sectors and to assist in determining
priorities for longer term financial sector development. To enhance
collaboration and consistency in policy advice between the two institutions on
broader aspects of their financial sector work, and to provide a coordinated
approach to the provision of technical assistance, the World Bank-IMF
Financial Sector Liaison Committee (FSLC) has been operating since late
1998.

29. Within the IMF, Financial Sector Stability Assessments (FSSAs) are
prepared on the basis of the FSAP reports for each country. FSSAs are
designed to provide a sharper focus on vulnerabilities identified during the
FSAP. Staff assessments of risks to the macroeconomy emanating from the
financial sector are brought into the Article IV consultation, and are used in
IMF program design.

30. The FSAP pilot program is now well underway. During the pilot,
assessments are to be prepared for twelve countries, covering a diverse range
of financial systems and geographic regions. Owing to the resource-intensive
nature of the program, the specialized skill requirements, and the limited
staff resources in the World Bank and the IMF, national central banks and
supervisory agencies, as well as international standard-setting bodies, have
been invited to provide experts to participate with the World Bank and the IMF
in the assessments of individual countries. To date, four of the pilot
assessments have been completed and a further eight cases are close to
completion. Feedback gained so far from the authorities of the countries
involved has been generally positive, and their suggestions on how the FSAP can
be further improved are helping to shape refinements to the Program.

31. The Executive Boards of the IMF and World Bank recently considered a
progress report on the FSAP pilot, which highlighted a number of important
lessons (see Box 3). On the basis of the experience gained so far with the
pilot, it has been agreed to continue the Program. It is envisaged that the
pace of country coverage will pick up to 24 countries in the coming year.
Experience gained with this next round of assessments, as well as with the
twelve pilot cases, will develop a larger body of experience on how best to
incorporate the assessments into surveillance.

Box 3: FSAP Progress Review—Some Key Conclusions

The FSAP has helped country authorities identify areas in need of
strengthening and guided the adoption and sequencing of necessary reforms. In
some cases, it has provided a stimulus for officials to focus attention on
significant financial system issues earlier, and in more depth, than might
otherwise have been the case.

At the same time, the FSAP can be further improved. There is a need to
better understand the linkages between macroeconomic and structural conditions
and developments. To this end, the research agenda on financial stability and
structural issues needs to be accorded a high priority. Even greater emphasis
on focussing individual assessments at the earliest possible stage on the key
financial sector issues relevant to the individual case will assist in making
most efficient use of both national authorities’, and FSAP
missions’, staff resources.

Implementing the FSAP has required capacity building in the IMF and World
Bank: staff skills in both institutions are being enhanced, particularly in the
areas of analytical methods and techniques to assess the health of financial
institutions and financial sectors as a whole. In this context, attention is
being paid to stress test methodologies and the development of macro-prudential
indicators.

The participation of staff from national authorities and other
standard-setting bodies provided a valuable contribution to the FSAP pilot,
particularly in the areas of supervision and payment systems. Outside
participation brought in important specialized expertise and an element of peer
review, thereby increasing the credibility and acceptance of the
assessments.

32. Work on strengthening financial systems has also progressed in other fora
and institutions. (See Appendices I, II and III).

In collaboration with non G-10 countries, the Basel Committee has continued
work to flesh out the new capital adequacy framework, outlined in the
consultative paper issued in June 1999. On the basis of comments received from
interested parties, the Committee plans to release more definitive proposals
later this year for a further period of consultation.

The FSF Working Groups on Highly Leveraged Institutions and Offshore
Financial Centres have presented their final reports and recommendations
which were endorsed by the Forum in late March (Appendix II). A number of these
recommendations are relevant for the operations of the IMF and will require
careful consideration by the Executive Board in coming months.

33. Countries can benefit substantially from capital account liberalization
but prosperity can be threatened if it is not properly sequenced and managed to
minimize risk. IMF surveillance is designed to assess risks and
vulnerabilities at both the national and international level. A necessary
precondition for an effective assessment of vulnerability is the availability
of timely, frequent, and high quality data. With hindsight, the limitations of
such data delayed the early detection of some of the strains that led to the
recent financial crises, and exacerbated the difficulties in developing and
managing a timely policy response. As a result, considerable effort is now
being focused on ways to improve the timeliness, frequency, and quality of
relevant data. At the same time, efforts have continued to broaden and deepen
the analysis of potential sources of risk and vulnerability in both bilateral
and multilateral surveillance. These efforts draw heavily on analytical work
underway in the IMF, World Bank, and other international institutions and fora.
This analysis has utilized a broad range of vulnerability indicators in
conjunction with standard economic analysis.

34. Work to develop better methods for assessing external vulnerability has
progressed on several fronts in the IMF and World Bank. Section II outlined
the increased stress on the dissemination of comprehensive and timely data on
external debt and official reserves under the SDDS. Work to strengthen the
availability of data on external debt and foreign exchange liquidity is also
underway in other fora. The IMF-chaired Task Force on Finance Statistics
(TFFS)5 has maintained a
quarterly database of creditor-side data on external debt on the Internet since
March 1999. The TFFS is working to enhance the timeliness and coverage of these
data. The BIS has announced a number of initiatives to enhance the coverage and
analytical usefulness of its international banking statistics. The FSF Working
Group on Capital Flows has recommended improvements in data from national,
creditor, and market sources (Appendix II). Western Hemisphere Finance
Ministers have called upon interested participants to prepare discussion papers
on their debt and fiscal management policies and have asked the Inter-American
Development Bank (IADB), IMF and World Bank to host a seminar to discuss these
papers. Issues related to debt management are also likely to be discussed by
the G-20 later this year.

35. In response to a request from the FSF Working Group on Capital Flows, the
IMF hosted a conference on capital flow and external debt data on February
23-24, 2000. This conference brought together a wide range of data users in
the public and private sectors and data compilers for an exchange of views on
the priorities for producing better and more timely data on debt and capital
flows. Views among participants on directions for future work differed widely,
although all considered that initiatives to date to promote methodological and
data dissemination standards had been useful. The agenda, background material,
and a summary of the conference have been posted on the IMF’s website.6

36. The IMF and World Bank are also collaborating on a series of papers on
aspects of external debt management.

Drawing on research at the World Bank, IMF and elsewhere, work has been
undertaken on debt and reserve-related indicators of external
vulnerability which considers the analytical usefulness of various
indicators and the scope for the derivation of simple benchmarks (such as
threshold levels for certain indicators) to better gauge countries’
abilities to withstand external shocks.

A manual on sound practices in sovereign debt management is in
preparation. Drawing upon both country experience and the theoretical
literature, this paper will provide information on the analytical basis for
public sector debt policies, consider linkages to monetary and fiscal policy,
discuss issues in determining the level and terms of external debt and the mix
between domestic and external financing, and address legal and institutional
arrangements for debt management and monitoring systems.

A similar manual for the development of domestic capital markets is
intended mainly to provide practical advice on how to establish and develop a
market for public sector, domestic currency, bonds in order to help mobilize
domestic saving and maintain a more balanced public financing strategy.

Drawing upon the material in the other papers, including the detailed
frameworks and reviews of country experience, a further paper to be considered
during the summer will distill the main lessons and seek to arrive at a
relatively compact set of "core principles" for sovereign debt
management. As with the background papers (particularly the two manuals),
this paper will be informed by consultation with IMF/World Bank members.

37. In other related areas:

A number of discussions have been held by the Executive Board during the
past year dealing with structural and institutional factors in the
management of foreign exchange reserves. The results of these discussions
will feed into the IMF’s surveillance, financing and technical assistance
activities.

With IMF assistance, systems for high-frequency monitoring of
external liabilities of domestic banking systems have been established in a
number of countries to improve the authorities’ capacity to detect
emerging signs of vulnerability and help in crisis management. The usefulness
of these and other systems for high-frequency monitoring of foreign exchange
transactions is presently being assessed by the IMF staff in consultation with
member countries.

In collaboration with other international organizations, the IMF is also
developing macro-prudential indicators (MPI) of financial sector
vulnerability. This work is at an early stage, and the Executive Board has
agreed that it would be premature to include MPIs in the SDDS at this stage.
The Executive Board will consider the results of further analytical work before
the Annual Meeting later this year.

The IMF has also participated in efforts to develop early warning
systems for external crises—formal models that estimate the
probability of crisis from a compact set of variables—in order to better
inform surveillance. The Executive Board has noted that while early warning
systems could be a useful additional tool for surveillance, caution is required
in their use. Work is continuing to improve the accuracy of these models and to
find their most useful applications.

38. Work on the analytical framework for the assessment of external
vulnerability, at the IMF and elsewhere, underscores the importance of
timely information on the external liabilities and foreign exchange exposures
of all sectors of the economy, as well as analysis of the risks posed by
derivatives exposures and contingent liabilities. In parallel with the
effort to develop better information on these sources of vulnerability, further
research is underway on how to measure vulnerability from off-balance-sheet
operations, such as through stress-testing. The World Bank is also conducting
research on issues of corporate sector vulnerabilities.

39. In several discussions over the last year the Executive Board has
emphasized the substantial benefits of capital account liberalization, but
stressed the need to carefully manage and sequence liberalization in order to
minimize risks. It has been agreed that while there is no single approach
to ensure success, liberalization needs to be supported by a consistent
macroeconomic framework and institutional arrangements that allow financial
intermediaries and market participants to properly assess and manage risks.
While there remain differences of view on the merits of capital controls, it is
generally agreed that controls cannot substitute for sound macroeconomic
policies, although they may provide a breathing space for corrective action.7 Discussions will continue on these
issues during the summer when the Executive Board considers the implications of
capital account liberalization for financial sector stability. The Board will
also discuss policies to ensure stability in an environment of capital
mobility; liberalization strategies, including the scope and sequencing of
financial reforms; and prudential policies to safeguard financial stability in
the course of capital account opening.

40. Since the emerging markets crises, the surveillance of capital account
developments has been given greater prominence in Article IV consultations.
Staff reports have increasingly included a discussion of a range of
vulnerability indicators, and assessments of policies have increasingly
considered the extent of vulnerabilities arising from capital flows. Policy
discussions have focused increasingly on the composition of capital flows and
capital account regulations. Special attention is being given to risks posed by
the potential reversal of capital inflows, the impact of selective capital
account liberalization and the rapid accumulation of foreign-currency
denominated debt. Looking ahead, there is room to expand the systematic use of
vulnerability indicators in surveillance. The coverage of capital account
issues in surveillance could also be broadened to include the adequacy of
prudential safeguards to ensure the financial sector and the wider economy are
resilient to possible shocks.

41. The choice of an appropriate exchange rate regime has become ever more
important as an increasing number of countries have become more closely
integrated in world capital markets in an environment of widespread
liberalization and expansion of capital movements. In such an environment
the requirements for sustaining a fixed exchange rate have become more
stringent, as countries cannot simultaneously maintain a monetary policy
directed at domestic objectives, open capital markets and an exchange rate peg.
As a result of the recent crises, several countries have adopted flexible
exchange rate regimes, while those with very hard pegs (e.g., the adoption of a
common currency or of a currency board) have been able to maintain them.
Irrespective of regime, credible supporting policies (including an alternative
nominal anchor for countries with floating exchange rates) and institutional
arrangements are critical to success. The Executive Board has revisited the
issue of appropriate exchange rate regimes, emphasizing that sound exchange
rate policies are central to the effective operation of the international
monetary system (Box 4). It has stressed the need for the IMF to continue to
exercise firm surveillance over the exchange rate policies of members and to
provide candid advice to members on their choice of exchange rate regimes. The
Board has also underlined the need to ensure that the spillover effects of
macroeconomic and structural policies in major currency countries are fully
taken into account in the surveillance process.

42. In recent years, the assessment of exchange rate policies in the context
of IMF surveillance has been significantly strengthened for most countries, and
particularly so for advanced and emerging market economies. Analyses of
exchange rate determinants have been deepened, and greater candor in
assessments and policy advice is evident. There is scope, however, for further
improving the analysis of exchange rate policy issues in developing countries,
despite the constraints imposed by data limitations. Looking ahead, efforts are
underway to extend to a broader group of members the existing framework used in
the analysis of exchange rate behavior and policies in advanced countries.

Box 4: Exchange Rate Regimes

The Executive Board has considered the key issues concerning exchange rate
regimes in an environment of increasing international capital mobility, with
the following main conclusions:

No single exchange rate regime is appropriate for all countries or in all
circumstances. Whatever exchange rate regime is adopted, its consistency
with underlying macroeconomic policy is essential.

The existing system of flexible exchange rates among the three major
currencies (dollar, yen and euro) is likely to continue to prevail.
Other countries would, therefore, need to adapt to a global environment of
exchange rate variability. However, large misalignments and volatility in major
currencies are a cause for concern, particularly for small, open,
commodity-exporting countries.

In recent years, several emerging market countries have adopted a
flexible exchange rate regime. The requirements for maintaining a peg when
capital is internationally mobile are exacting. However, even with flexibility,
supporting macroeconomic policies should be coherent and credible, including by
providing an alternative nominal anchor, such as inflation targeting.

Large exchange rate fluctuations in small or medium-sized open economies
may have significant economic costs. While it is important that exchange
rates be allowed to adjust in response to market pressures, it may also be
appropriate to use domestic monetary policy or intervention to limit
fluctuations, to the extent they affect inflation and inflationary
expectations.

If credible supporting policies and institutions are in place,a
peg could still be viable for the smaller, more open economies, especially
those less open to short-term capital flows or with a dominant trade partner.
In particular, very constraining pegs—such as, currency boards—can
be sustainable when supported by credible macroeconomic policies.

The IMF should continue to respect the exchange rate regime choices of
members, but its surveillance and programs must seek to ensure that
countries’ policies and circumstances are consistent with their exchange
rate regimes. The IMF should not provide large-scale assistance to
countries intervening heavily to support an exchange rate peg if this peg is
inconsistent with underlying policies. In some cases it should offer advice on
an appropriate exit strategy.

43. The involvement of the private sector is critical to forestall and
resolve financial crises, and prevention remains the first line of defense
against crises. Recent experience confirms that consistent macroeconomic
and exchange rate policies, sound debt management designed inter alia to ensure
an appropriate debt-service profile, and effective prudential supervision of
financial systems are all critical elements of a policy framework designed to
manage vulnerabilities and thereby reduce the frequency and severity of crises.
At the same time, policies designed to improve the environment for private
sector decision making can also contribute to reducing vulnerability.
Improvements in the transparency of both the public and private sectors, as
well as efforts to promote the adoption of, and adherence to, standards, should
facilitate risk management on the part of investors. Also of note is the
importance attached by private market participants to regular contacts between
the authorities and market participants, to ensure the regular provision of
information on economic developments and policies, and to maintain lines of
communication both in good times and when possible difficulties in the
country’s economic situation begin to emerge.

44. The Executive Board noted that the need to secure appropriate private
sector involvement now seems reasonably well accepted, including by the private
financial community. In reviewing recent experience, Directors considered that
the two recent cases of efforts to secure private sector involvement with
members that had lost spontaneous access to capital markets through the
restructuring of international sovereign bonds had been encouraging. Debt
exchanges had been arranged successfully and, while it is premature to assess
whether litigation may ultimately become an issue, it appears that in recent
cases the risks of disruptive litigation were not as great as previously
thought. Successful debt exchanges in these cases involved the recognition by
creditors of the limited debt-servicing capacity of the debtors involved, and
of the lack of palatable alternative outcomes. The precise form of the recent
debt restructurings8 depended on
the structure of the payments falling due, and the particular country
circumstances and did not necessarily involve comparable treatment of all debt
or maturities.

45. The Executive Board sees merit in continuing to work toward an
operational framework for securing private sector involvement, building on the
principles and framework articulated by the G-7 Finance Ministers in their
report to the Köln Economic Summit.

46. Flexibility will be required in handling individual cases. The form
of continued private sector involvement would depend on the circumstances of
each case, as would the methods used to ensure it. The financing of the
adjustment program of a member coping with a financial crisis would normally be
based on the expectation that private sector exposure to the country would
either be maintained above some level, or begin to be rebuilt soon after the
emergence of a crisis. In some cases, reliance would be placed primarily on the
IMF’s traditional catalytic role, with the strength of the IMF-supported
adjustment program enhancing market confidence and therefore expected to lead
to the restoration of spontaneous private capital flows. In cases where greater
assurance was needed, the catalytic role of the IMF would have to be
supplemented by measures to improve coordination among creditors.

47. Assessing the appropriate means to secure private sector involvement in
individual cases raises complex issues, and will require considerable
judgment. A range of issues have a bearing on the approach to private
sector involvement in individual cases, including the size of the financing
requirements, both during the program period and over the medium term; the
prospects for a spontaneous return to capital market access; the availability
of tools for securing concerted private sector involvement; and the
desirability of minimizing possible spillover effects on other countries.
Reaching these judgements will require addressing complicated analytical
issues.

48. The basic principles underlying the IMF’s approach to private
sector involvement should be to allow the IMF to support effective balance of
payments adjustment programs leading to sustained growth and medium-term
viability, while providing adequate safeguards to maintain the revolving
character of IMF resources. These principles, in turn, require that
programs with member countries be fully financed. In addition, it is important
that the availability of official financing, in so far as possible, not create
moral hazard by providing incentives for inappropriate lending or borrowing.
The Executive Board stressed that, in making operational a framework for
private sector involvement:

contracts should be honored to the extent possible;

members should seek cooperative solutions to emerging debt difficulties;

no one category of private creditor should be regarded as inherently
privileged relative to others; and

the approach taken in individual cases should reflect a member’s
specific circumstances, including the composition of outstanding debt
instruments; and should be based on a substantive analysis of a country’s
medium-term balance of payments prospects and debt sustainability.

49. Executive Directors considered that the framework suggested by staff for
private sector involvement (outlined below), in conjunction with the principles
outlined in the preceding paragraph, constituted a useful start, but pointed to
several problems in making it operational, including the difficulty of the
underlying analytical judgements. Under the approach discussed, private sector
involvement could be ensured primarily through reliance on the IMF’s
traditional catalytic role:

if the member’s financing requirements are moderate, or

if the member has good prospects of rapidly regaining market access on
appropriate terms, even in cases in which the financing requirements are
large.

More concerted forms of private sector involvement could be
required:

if the financing requirement is large and the member has poor prospects of
regaining market access in the near future, or

if the member has an unsustainable medium term debt burden.

50. The IMF’s approach to a given case requires a decision on how much
financing the official sector is willing to make available in support of a
member’s adjustment program. Most Executive Directors noted that the
availability of IMF financing beyond that provided under the IMF’s access
policy is quite limited and, while the Supplemental Reserve Facility (SRF) is
available under specified circumstances, care should be taken to avoid creating
the impression that the IMF, or the official sector as a whole, would fill all
financing gaps. At the same time, the difficulty of determining ex ante the
precise distribution between official and private sector financing was noted.
Some Directors considered that there should be a presumption that private
sector involvement will be secured, should the IMF’s financing in
relation to the member’s quota exceed some limit. Others, however,
considered that the size of the financing requirement was only one factor in
deciding on concerted involvement and placed more stress on the need for a
strong program that would assure the rapid restoration of market confidence and
limit the risk to official resources.

51. In cases in which reliance is placed on the IMF’s catalytic role
and the assumption about the return to market access proves to be wrong, the
risks to the program financing and the IMF’s resources would increase
unless there was a switch to more concerted forms of private sector
involvement. To justify the strategy of relying on the catalytic role, it
is crucial that the authorities’ program be directed to rebuilding market
confidence and removing any factors that inhibit the right sort of capital
inflows, and that the authorities be fully committed to its sustained
implementation. Some Executive Directors consider that a reduction of official
financing might be needed in certain cases to ensure an appropriate balance in
the contributions of the private and official sectors.

52. When a member has an unsustainable debt burden, private sector
involvement in a restructuring or reduction of that burden would be
required. Determining whether a debt burden is unsustainable is a
judgmental exercise, and it could take time for the member and its creditors to
reach agreement on the extent of the problem and its solution. In such cases,
the IMF would be prepared to lend to a member in arrears to its private
creditors, as in other cases in which early support for a member’s
adjustment program is considered necessary and provided the member was
negotiating with its creditors in good faith.

53. Where private sector involvement is required, its precise form will have
to be decided on a case by case basis. Some Executive Directors considered
that the approach to be taken in individual cases should seek to avoid
prohibitive increases in the future cost of borrowing for the country
concerned. Directors believed that, in general, efforts to involve the private
sector would be concentrated on the debt payments associated with the immediate
financing problem, and would thus not necessarily be comprehensive across all
classes of private instruments. However, experience suggests that
comprehensiveness within an asset class can contribute to a successful outcome.
In addition, it is particularly important that no one category of private
creditor be regarded as inherently privileged.

54. Only limited progress has been made in lifting institutional constraints
to debt restructuring. Executive Directors encouraged the establishment of
creditor committees if needed and on an ad hoc basis, and see merit in
incorporating collective action clauses into international sovereign bond
contracts. The inclusion of such clauses in certain United Kingdom sovereign
bonds was welcomed, as was the recent clarification of the status of such
clauses by the German Government. Directors considered that temporary and
voluntary market-based standstill arrangements could be desirable in some
circumstances to minimize the risk of disruptive litigation, and some
considered that there should be further consideration of issues related to a
modification of Article VIII, Section 2(b).

55. IMF staff have a role in informing creditors of the status of
negotiations with the IMF, and of the member’s economic situation,
including its adjustment program and payments capacity, provided this is
acceptable to the member concerned. Nevertheless, it is important to
maintain the principle that the IMF is not a party to the negotiations between
a member and its creditors.

56. The Executive Board has initiated a fundamental review of the design and
operation of the IMF’s non-concessional financing facilities to determine
whether and how they need to be modified to meet members’ needs in a
changing world economy.9 This
review is a part of the broader debate on the architecture of the international
financial system and touches on issues that go to the core of the IMF’s
role in that system.

57. Although the discussion is in its early stages, the Board has made
substantial progress in streamlining—eliminating facilities that are not
being used or no longer serve member’s needs. The Board has decided
to eliminate the IMF’s policies on support for Currency Stabilization
Funds and commercial bank Debt and Debt Service Reduction. With the elimination
earlier this year of the contingency element of the Compensatory and
Contingency Financing Facility (CCFF) and the Buffer Stock Financing Facility,
this brings to four the number of facilities that have been eliminated since
January 2000, in the effort to simplify the IMF’s facilities and make
them more transparent to both members and the general public. In addition, the
Compensatory Financing Facility (the remaining element of the CCFF) will be
simplified substantially. In addition, the temporary Y2K facility expired, as
planned, on March 31, 2000. Policies on use of IMF resources in the first
credit tranche and on emergency assistance for natural disasters and
post-conflict cases will be retained.

58. With this agreement on what might be called "housecleaning"
questions, the debate focuses on the more fundamental issues involved in
determining whether the spectrum of facilities meets today’s needs and
whether the terms of the facilities remain appropriate. The Executive Board
has affirmed the IMF’s role in helping members adjust to large-scale
crises of capital market confidence such as had occurred in the 1990s. In doing
so, it stressed again the importance of stemming moral hazard and of involving
the private sector in the resolution of crises. There was general agreement
that the Supplemental Reserve Facility (SRF) had proved itself an appropriate
tool since its creation in 1997. In part reflecting the limited experience with
this facility so far, no modifications to the SRF are proposed at this
juncture. However, potential modifications to other facilities will be
explored, in particular to encourage crisis prevention efforts by members,
including possible changes in the design of the Contingent Credit Lines (CCL)
and in the use of precautionary arrangements for this purpose.

59. The IMF’s more traditional financial operations—use of the
upper credit tranches under stand-by arrangements (SBA) or the Extended Fund
Facility (EFF)—continue to constitute the majority of the IMF’s
arrangements, and it is generally expected that the SBA will remain the
IMF’s principal instrument. The Executive Board is reviewing the
focus and design of these facilities. A range of views have been expressed
regarding the degree to which the use of IMF resources by members with ongoing
access to capital markets is warranted or, conversely, is a cause for concern.
There was broad agreement that there continues to be an important role for the
EFF, although a variety of views were expressed on some of its modalities. The
Board stressed, however, that access to the EFF should be available only in
circumstances that clearly require and warrant its use.

60. Among the specific issues that will be considered in further
discussions are policies on the rate of charge on use of IMF resources,
including possible differentiation of charges within and between facilities;
maturities on use of IMF resources, including possible improvements in
the policy on early repurchase; steps to address better cases of weak program
implementation and consequent repeated recourse to IMF resources; and
procedures for improved post-program monitoring of policies by the IMF
while IMF resources remain outstanding.

61. The issues involved in the orientation and design of IMF financing
facilities are complex. Concrete decisions will both require greater
clarity on the role of the IMF in the international financial system and be
influenced by progress on other key aspects of the system’s design.
These issues will continue to shape much of the Executive Board’s work in
coming months.

Appendix I. Progress in Strengthening the International Financial
Architecture

Proposal/Action Required

Action Taken up to September 1999

Executive Board’s View

Progress Since September 1999

Next Steps

I. Surveillance

A. Transparency and Accountability

(i) IMF

Public Information Notices (PINs).

Release PINs following Article IV consultations.

Agreement to release PINs following Article IV consultations. PINs released for 80 percent of Article IV consultations in January–August 1999.

Executive Board endorsed both proposals.

PINs released for about 80 percent of Article IV consultations from September 1999 through mid-February 2000.

In June 1999, the Executive Board agreed to: (i) establish a presumption that LOIs/MEFPs and PRSPs would be released, subject to a review after one year; and (ii) release Chairman’s statement in UFR cases. More than 25 sets of program documents issued.

Endorsed.

As of March 23, 2000, 54 sets of program documents were issued under new policy. Others are in the process. A few countries have released some, but not all, documents. Chairman’s statements released for 71 UFR discussions.

IMF Executive Board to review policies in August 2000 and revisit the issues of publication of UFR PINs and staff reports. In addition, review to take into consideration experience gained in transparency in other areas.

FSF Working Groups on HLIs, OFCs, CF presented reports to FSF at end-March 2000. Recommendations included calls for a set of good practices for provision and sharing of timely information (OFCs), enhanced public disclosure (HLIs) and improved data on aggregate external flows and positions (CF). (See Sections C, D and E for other key recommendations).

MFPT Code adopted by IMFC in September 1999. Members urged to implement the Code.

Assessments of countries’ observance of the Code initiated, completed and published for several countries.

Adopted Code on July 9, 1999.

Work continuing to develop a supporting document to the Code, in collaboration with appropriate institutions. Ten assessments of observance with the Code undertaken since September 1999, two of which completed through Executive Board discussions of FSSA reports.

Regional consultative meetings convened to broaden awareness of the Code and supporting document.

IMF staff finalizing the supporting document to the Code, which will be presented to the Executive Board in June 2000.

IMF Executive Board to review experience with assessment against the MFPT Code by October 2000.

Banking supervision.

Address gaps in existing standards. Review 1988 Capital Accord.

Identify areas where further work could help countries achieve compliance with the Basle Core Principles (BCP).

Consultative paper on new capital framework published by BCBS in June 1999.

Draft methodology for BCP assessments, prepared with IMF and World Bank participation, published, and being used in IMF and World Bank work.

Worldwide acceptability of the new capital proposals being examined.

Supportive.

New capital adequacy framework being fleshed out. Final core principles methodology has been published.

IMF and World Bank have conducted several assessments of countries’ compliance with the BCP, which are increasingly being conducted as part of FSAPs.

Basel Committee to put out a second, more definitive, consultative paper on the new capital adequacy framework by end 2000.

IMF and World Bank to continue with BCP assessments, mostly as part of FSAPs.

Basel Workshop planned in May to review, and probably revise, BCPs.

IMF Executive Board to review experience with the assessment of the BCP in first half of 2000.

Countries being encouraged to make assessments of fiscal transparency. Fiscal ROSC modules underway in 8 countries scheduled for completion by June 2000.

National authorities to aim at adhering to Code.

IMF staff to continue preparing ROSC modules. Another 20 ROSC modules to be completed by June 2001.

Further work on Manual of Fiscal Transparency planned in mid- 2000.

SDDS

Strengthen SDDS prescriptions for international reserves and foreign currency liquidity.

In March 1999, the Executive Board approved a template for reporting data on international reserves. Procedures for monitoring observance of the standard established.

Supportive. Some concerns about degree of detail, costs of observance, and lack of symmetry in publication of data by private sector. Executive Board supported SDDS prescription for dissemination of full data corresponding to new template on a monthly basis. Full data dissemination on a weekly basis to be encouraged.

By March 31, 2000, nine countries had started disseminating reserves data in the format of the template.

Other countries to consider subscribing to SDDS and take necessary steps to this end.

IMF staff to collaborate with other international organizations to prepare revised operational guidelines for reserves template in 2001.Structured monitoring of observance to begin by end-June 2000.

IMF staff to: work on establishing common database for country data on reserves and foreign currency liquidity, including redissemination of data on IMF website; improve presentation and functionality of DSBB; prepare quarterly reports on SDDS, covering country subscription and recent developments.

IMF staff to collaborate with other international organizations to prepare a debt guide in 2001.

In December 1998, the Executive Board generally supported introduction of a separate SDDS data category for external debt to be disseminated quarterly with one-quarter timeliness.

Further consultations have taken place on the implementation of a new data category on external debt. The Executive Board supported the introduction of a separate SDDS data category for quarterly external debt statistics to be phased in over a three-year transition period. Countries also encouraged to disseminate data on forward debt service obligations and on the domestic/foreign currency breakdown of external debt.

Supportive. Encouraged staff to proceed with assessments over the next 12 months and to develop specific proposals for extending work. Indicated preference for shared ownership approach. Invited World Bank to experiment in preparing particular modules.

Third round of case studies underway in IMF and World Bank. Comprehensive reports to be built up over time on a modular, standard-by-standard, basis. Financial sector modules being undertaken in the context of the FSAP. Work on modules proceeding in collaboration with World Bank; each institution taking primary responsibility for preparing assessments in areas consistent with mandate and expertise.

G-20 members and CHFI/Western Hemisphere Finance Ministers agreed to participate in preparation of ROSCs.

IMF staff to continue experimenting with the modalities involved in preparing ROSCs.

The IMF plans to prepare a further 60 ROSC modules for 18 countries by mid-2000.

World Bank aims to prepare 6 corporate governance modules by mid-2000 and around the same number of accounting modules by end-September.

The experience will be further reviewed in mid-2000.

(ii) Other fora

Assessing offshore financial centers (OFCs) adherence to standards.

FSF Working Group on OFCs convened to consider significance of OFCs in relation to global financial stability.

Working Group report reviewed by FSF at end-March 2000. Key advice included creation of process for assessing OFC adherence to standards; consideration of incentives for implementation of standards; and development of good practices for provision of information on corporate vehicles.

Implementation of recommendations to be followed up.

IMF Executive Board to consider in mid-2000 Working Group recommendation that IMF organize a process for assessing OFC’s observance of relevant international standards.

Promoting implementation of standards.

FSF Task Force on Implementation of Standards set up to consider strategy to promote implementation of standards.

Report reviewed by FSF at end-March 2000 focused on ownership of standards, incentives for implementing standards, and related official and private resource considerations.

FSF to consider further issues related to implementation of standards.

Relevant standard setting bodies to assess countries' observance of international standards in areas of their mandates and expertise.

FSAP pilot program continues. Two additional cases completed and eight more in progress. Pilot to be completed by year–end. Experience with FSAP pilot program reviewed by Executive Board. Directors supported an expansion of the Program to cover 24 countries in the coming 12 months.

(ii) Other fora

Highly leveraged institutions (HLIs).

Review challenges posed by HLIs to financial stability in both mature and emerging markets, and identify supervisory and regulatory actions that will reduce their destabilizing potential.

Reports by BCBS and IOSCO (February 1999) on standards for banks’ financial relations with HLIs.

FSF Working Group on HLIs established.

Most Directors saw this as a particularly important area for improved supervision/ regulation, but recognized difficulties with design and measurement.

The report of the FSF Working Group on HLI concluded that these issues merit a concerted response; it recommended an "indirect" approach focusing primarily on supervisory and enhanced risk management by providers of credit to HLIs; improvements in individual HLI transparency to the markets; and in market infrastructure.

FSF to follow upon recommendation with a view to determining degree of implementation.

IMF Executive Board to discuss Working Group recommendations later this year.

IMF assesses external vulnerability in the course of Article IV and multilateral surveillance, taking into account these factors.

Executive Board encouraged members and IMF staff to give more attention to the vulnerabilities arising from debt and reserve management, and encouraged members to explore options for shifting risk with creditors.

IMF conference on capital flow and debt statistics in February 2000 brought together officials, data users, and statistical compilers. Papers and proceedings published on IMF website. IMF and World Bank preparing papers on (i) public debt management, (ii) developing domestic debt markets, and (iii) debt and reserves indicators.

Official community: work with emerging market economies to promote best practices; continue to develop analytical basis for assessing vulnerability.

IMF and World Bank to distill guidelines and/or benchmarks for public debt management later this year based on the ongoing work and results of related Executive Board discussions.

Sound Management of Official Foreign Exchange Reserves

Implications of poor practices and possible identification of a set of good practices.

IMF staff has begun work based on a survey of country practices, in close consultation with BIS and World Bank.

IMF workshop on techniques for high frequency monitoring of debt and foreign exchange market activity revealed widespread use of high-frequency monitoring and wide diversity in country practices. Results discussed by Manila Framework Group in March 2000.

Develop and test empirical models to help predict balance of payments crises.

Develop, for use within the IMF, prototype operational models to predict crises.

Saw merit in further research; cautious of reliance as crises predictor; concerned about publishing results in absence of reliable track record.

IMF staff has implemented on an experimental basis prototype enhanced models. Forecasts from these and existing private sector models have been presented to the Executive Board in the context of the WEMD session

IMF staff to continue to use and assess performance of existing models and develop possible improvements. Results to be periodically presented to Executive Board, consistent with concerns regarding confidentiality and the uncertainty of the forecasts.

Best Practices in Public Debt Management

Develop guidelines for public debt management.

IMF and World Bank have begun a joint work program to develop guidelines for public debt management.

IMF Executive Board to have preliminary discussions in mid-2000. International seminar to be held in 2000. IMF Executive Board will have follow up discussions in early 2001.

Data provision to the IMF.

Reach agreement on benchmark for reporting of reserves and related items and on specifications for reporting and external debt.

Executive Board reached agreement on minimum standard.

IMF staff reports for surveillance and UFR discuss members’ data provision practices, and summings-up include a discussion on data provision to the IMF.

Most Directors were supportive, but had differing views on content, reporting frequency, and lags.

Executive Board believes dissemination of MPIs would promote market discipline, but it is premature to include into SDDS without further analysis. IMF staff, in conjunction with other international organizations, is designing survey on the availability of data and dissemination and compilation practices relating to MPIs.

IMF staff will report on progress to the Executive Board before September 2000.

F. Capital Account Liberalization

Capital account liberalization and capital controls.

Identify approaches to achieving orderly liberalization and circumstances when there may be a role for capital controls.

Executive Board reached agreement on broad principles including the need for a case-by-case approach in assessing the use and effectiveness of capital controls.

Capital controls cannot substitute for sound macroeconomic policies although they may a provide breathing space; prudential policies play important role in orderly capital account liberalization; case-by-case approach needed.

IMF Executive Board to discuss in 2000 the linkage between capital account liberalization and financial stability, and how stability can be safeguarded in a liberalized capital account regime and in the process of liberalization.

FSF Working Group on CF established.

FSF’s published report on capital flows emphasized the need: to monitor risks and avoid distortions that could encourage buildup of unwarranted external exposure; for enhanced risk management by public and banking sectors; and for improved data and transparency. Against this background, it suggested that capital controls (on inflows) with a prudential element can be considered in some instances, provided macroframework is sound.

IMF Executive Board to discuss Working Group recommendations later this year.

G. Exchange Rate Regime

Study measures that could improve functioning of international monetary system. Focus on systemic issues.

Diverse views on merits of fixed and floating regimes in liberalized financial markets.

Follow-up discussion at Executive Board concluded that: no single exchange rate regime is appropriate for all members or in all circumstances; a substantial degree of exchange rate flexibility is desirable for many emerging market economies significantly integrated in global capital markets; IMF will continue to respect the regime choices of members but its surveillance and programs will continue to focus on consistency between countries’ policies and circumstances.

Discussions to continue.

II. Involving the Private Sector

Lending into sovereign arrears.

Allow IMF to lend into sovereign arrears to private bondholders to support adjustment.

Modify the 1989 policy to allow IMF to lend into arrears to private bondholders during negotiations. Revised in June 1999. Implemented in Ukraine and Russia in June/July 1999.

Agreement to modify 1989 policy on lending into arrears on a case-by-case basis to include arrears to private bondholders.

Program negotiations ongoing with Ecuador – if approved, could be a case of IMF lending into sovereign arrears to private bondholders.

Apply on a case-by-case basis.

Lending into nonsovereign arrears.

Allow IMF to lend into nonsovereign arrears arising from the imposition of exchange controls.

Extend further the 1989 policy to lend into nonsovereign arrears during negotiations. Revised in June 1999.

Directors agreed that the IMF should be willing to lend into arrears under these circumstances, on a case-by-case basis.

Broad support in international community to introduce clauses, but major emerging market borrowers hesitant to take lead.

Directors supported the proposal. Many Directors suggested that industrial countries introduce such terms in their own bond issues.

Discussions continue in the G-10 Deputies meetings.

Since January 2000, the U.K. Treasury has been including collective action clauses in all its foreign currency debt; Germany issued a statement in February 2000 saying that collective action clauses in sovereign bonds are valid under German law. G-7 Finance Ministers to further consider the possible inclusion of such provisions in their own debt instruments.

Focus on legal and practical concerns, including through ongoing consultations with private sector players and authorities of emerging market and industrial economies.

BCBS to consider comments and issue revised proposals for further consultation later in 2000.

Private contingent credit lines.

Contract market-based contingent credit lines with private institutions to trigger liquidity support in times of crisis.

Argentina, Indonesia, and Mexico arranged credit lines; Indonesia and Mexico drew down their lines in 1998.

Generally supportive with appropriate pricing, but noted that creditors may withdraw other credit lines when contingent lines are drawn, and that care was needed in design.

No new private contingent credit lines arranged.

Official community: assess whether there is a role for official sector to support;

Debtor countries: discuss with creditors.

Creditor committees

Decision on desirability of such committees, and their nature and function.

Preliminary discussions.

Executive Board noted that creditor committees could be effective in resolving financial crises.

Work continues.

IMF staff is continuing to study analytical basis for committees in consultation with private sector, including INSOL.

III. IMF’s Financial Facilities and Resources

IMF Resources

Increase in IMF’s quotas and entry into force of IMF’s NAB.

IMF quotas increased following Eleventh General Review of Quotas.

NAB activated.

Endorsed.

Implemented.

IMF Executive Board to review quota formulae in the context of the 12th General Review.

PRGF/HIPC

Secure full financing for interim PRGF and the IMF’s participation in HIPC Initiative.

IMF Executive Board reached agreement on the main elements of a financing package.

See previous column.

In December 1999, Executive Board took decisions to allow bilateral contributors and IMF to make contributions to PRGF-HIPC Trust, including the decision to undertake off-market gold transactions. Considerable progress made in securing pledged contributions. Gold transactions expected to be complete by April 2000.

Efforts to secure remaining contributions.

Review of IMF Facilities

Assess consistency of IMF’s existing facilities with IMF’s role in today’s global economy.

In preliminary discussions, broad consensus that no changes to the SRF will be pursued at this stage, but that the design of the CCL should be reconsidered. A variety of views on the EFF, but agreement that strict judgements are needed on eligibility. Discussion on degree to which access to IMF resources by members with ongoing access to capital markets is warranted. Concern about repeated IMF arrangements and adequacy of post-program monitoring.

IMF Executive Board will consider specific proposals on some of these points in the next few months and continue discussion on the more difficult issues.

Design of CCL to be reconsidered in 2000.

Simplify structure of IMF facilities to enhance transparency to members and to the public.

Four facilities—the BSFF, the contingency element of the CCFF, the CSF and IMF support for DDSR operations—eliminated. Agreement to streamline CFF.

IV. Other Issues

Interim Committee (IC)

Strengthen and/or transform Interim Committee.

The IMF Board of Governors adopted a resolution transforming the Interim Committee into the IMFC in September 1999.

Diverse views on how to transform Interim Committee.

Appendix II. Key Recommendations of FSF Working Groups

The Working Group on Highly Leveraged Institutions (HLIs) was asked
to assess the challenges posed by HLIs to domestic and international financial
stability and to achieve consensus on supervisory and regulatory actions which
would minimize their destabilizing potential. It has recommended improved
market discipline through:

Enhanced risk management practices by HLIs and their counterparties, and
enhanced regulatory oversight of HLI credit providers, notably in terms of the
recommendations promulgated by the Basel Committee, IOSCO, and the Counterparty
Risk Management Policy Group.

The development and dissemination of sound practices for risk management,
internal controls, disclosure and documentation throughout the HLI
community.

The formation of a small group of experts from the Basel Committee and IOSCO
to assess industry progress in the area of counterparty risk management (e.g.
stress testing, liquidity measures, etc.).

Further steps to improve documentation harmonization, collateral and
valuation practices.

Enhanced public disclosure by HLIs, and more generally, more comparable
risk-based public disclosure practices among all types of financial
institutions.

Revision and development of industry guidelines and good practices for
foreign exchange trading.

The Working Group on Offshore Financial Centers (OFCs)1 was convened to consider the significance of
OFCs in relation to global financial stability. It has proposed the
following:

The establishment of a process for assessing OFCs’ adherence to
international standards, developed, organized and conducted by the IMF; with
priority placed on OFCs with existing procedures for supervision and
cooperation but where there is substantial room for improvement and those with
the most significant financial activity; the international standards to be
assessed would relate to cross-border cooperation and information sharing,
essential supervisory powers and practices, and customer identification and
record keeping.

Consideration of a menu of incentives to be applied by relevant bodies or
groupings, which would encourage OFCs to adhere to standards.

More effective consolidated supervision in banking and insurance by onshore
jurisdictions.

The development of best practices for reinsurance and its supervision by
IAIS.

The development or completion of assessment methodologies by
standard-setting bodies.

Consideration of development of a set of good practices for provision and
sharing of timely information on activities and ownership of corporate
vehicles.

The FSF Working Group on Capital Flows (CF) was established to
examine ways to reduce the risks associated with capital flows. It has proposed
the following:

Improved risk monitoring at the national level, focusing on both sectoral
and economy-wide risks and liquidity.

Improved risk management by the public sector, including the development by
the IMF and World Bank of guidelines for the sound practice of debt and
liquidity management.

Improved risk management by the banking sector, particularly banks in
emerging markets receiving flows and international banks extending cross-border
credit, with the help of revised guidelines from the Basel Committee on
managing liquidity risk and possibly more explicit regulations to manage
foreign exchange exposure.

Greater risk management by non-bank financial and non-financial institutions
to ensure prudent behavior, including actions by national authorities to
promote good corporate governance.

A higher level of transparency by national authorities through, for example,
the disclosure of national risk and liquidity management operations,
publication of annual assessment of economy’s liquidity conditions, and
adoption and implementation of sound accounting standards.

Improved data on aggregate external financial flows and positions, with
efforts to clarify the importance of enhanced reporting and to fill gaps on
data provision, particularly from creditor and market-based sources of data on
external debt.

1 The Working Group defines
OFCs in terms of jurisdictions that attract a high level of non-resident
activity, with some or all of the following: low or no taxes on business and
investment income; no withholding taxes; light and flexible incorporation,
licensing, and supervisory regimes; flexible use of trusts and other special
corporate vehicles; no need for financial institutions and/or corporate
structures to have a physical presence; an inappropriately high level of client
confidentiality based on impenetrable secrecy laws; and unavailability of
similar incentives to residents. [Report of the Working Group on Offshore
Financial Centers, March 25-26, 2000, Box 2, page 9].

IOSCO is undertaking a self-assessment exercise on the implementation of the
Objectives and Principles for Securities Regulators. IOSCO is
considering proposals for a completeness and quality checking exercise for the
self-assessment exercise, and considering introducing a peer review process.
The IOSCO Secretariat is assisting the World Bank, IMF and regional development
banks in using the Objectives and Principles, most notably in relation
to the FSAP.

IOSCO has carried out a number of projects with the Basel Committee. In
October 1999 IOSCO and the BCBS issued Recommendations for Public Disclosure
of Trading and Derivatives Activities of Banks and Securities Firms
identifying categories of information which, if publicly disclosed, will assist
markets and counterparties in undertaking sound risk assessment of financial
institutions’ trading and derivatives activities.

IOSCO’s Technical Committee is currently evaluating the proposed
international accounting standards developed by the IASC (see below) to
determine whether it should endorse the IASC standards for use by foreign
issuers in cross-border listings and offerings. The evaluation should be
completed during 2000.

In November 1999, IOSCO issued a report, Hedge Funds and Other Highly
Leveraged Institutions, that recommends increased disclosure about the
activities of HLIs. In addition, the report concludes that there is a need for
greater transparency in the HLI sector, and IOSCO has recommended that the
Multidisciplinary Working Group on Enhanced Disclosure take this work forward.
As a follow-up to their work on HLIs, IOSCO and Basel Committee will undertake
discussions with the financial industry regarding industry-wide technical
assistance issues and improvements in risk management processes.

Insurance Regulation

International Association of Insurance Supervisors (IAIS)

IAIS membership adopted the Insurance Supervisory Principles. A
self-assessment survey was carried out to which half the membership responded.
The IAIS Task Force on Core Principles Methodology has prepared a methodology
that will be considered at the Task Force meeting in March 2000. The IAIS has
invited the IMF and the World Bank to comment on the draft. At the request of
the IAIS, the IMF and the World Bank are preparing a chapter for the
methodology document.

The IAIS is assessing the suitability of IAS for the insurance industry. The
IASC has published an Issues Paper on insurance in December 1999 as the first
step.

Payments System

Committee on Payment and Settlements Systems (CPSS)

The CPSS is working to improve the safety and efficiency of payments systems
globally. A task force of the CPSS, comprising G-10 and emerging market
economies along with the IMF, World Bank and ECB, issued a consultative
document on the Core Principles for Systemically Important Payment
Systems--CPSIPS (December 1999). This report sets out core
principles for the design and operation of systemically important payment
systems and defines central bank responsibilities in applying these principles.
The core principles establish a basic framework for the stable functioning of a
country's systemically important payment systems. The consultation period will
last until March 17, 2000. The Task Force is currently working on the second
part of this report, which will further clarify the issues addressed by the
core principles and provide guidance for their application in different
contexts. In particular, this part of the report will address the practical
concerns that payment system operators and central banks face in applying these
principles.

Accounting and Auditing

International Accounting Standards Committee (IASC); International
Federation of Accountants (IFAC)

International Accounting Standards (IAS) are promulgated by the IASC.
IOSCO is assessing whether IAS can be used by issuers undertaking cross-border
securities offerings and listings.

The IAS are being reviewed by the Basel Committee for their relevance to
bank supervisors. The BCBS has identified and reviewed those standards of
interest to bank supervisors.

The World Bank is developing a diagnostic tool for country assessment of
accounting standards and actual practices. This assessment framework will show
the strengths and weaknesses of the enforcement mechanism in implementing
accounting standards/rules and the conformity of national accounting standards
with IAS.

For the public sector, IFAC is formulating accounting standards based on the
IAS that will be completed by 2001. The IMF and the World Bank participate on
the Public Sector Committee (PSC) of IFAC.

International standards on auditing (ISAs) and audit practice statements
(IAPs) have been formulated by IFAC through its International Auditing
Practices Committee (IAPC). IAPC will work with IOSCO on ISAs for cross-border
offerings and reporting by foreign issuers as soon as IOSCO has completed
assessing the IAS. A significant number of IFAC members use the ISA as a basis
for developing their own national auditing standards. The standards developed
by IFAC/IAPC have no legal force; members are simply expected to use best
efforts to see that IFAC and IASC pronouncements are used nationally. However,
the IFAC encourages members to undertake self-review of their domestic auditing
practices to evaluate how well they compare with the ISA.

In January 2000, IFAC and large international firms launched a new
initiative to raise standards of financial reporting and auditing globally. A
key component of this initiative is the establishment of a new IFAC-sponsored
group of firms to work closely IFAC in developing and encouraging
implementation of international accounting and auditing standards. The
proposals also provide for independent oversight of IFAC’s public
interest activities.

The International Forum on Accountancy Development (IFAD) has been set up,
as an initiative of IFAC and the World Bank, to promote good accounting and
auditing practices worldwide.

Corporate Governance

OECD, World Bank; Basel Committee

The OECD Principles of Corporate Governance were endorsed in May
1999. The OECD and the World Bank have set up, with the cooperation of other
international organizations, a World Corporate Governance Forum, a private
sector advisory group and regional corporate governance roundtables to promote
an effective and continuing dialogue on corporate governance. The OECD, with
the World Bank, has been working to use the Principles as a framework for
dialogue and consultation with emerging and transition economies to improve
corporate governance practices. Various regional "round table"
meetings are being organized.

The World Bank Group has (i) supported, through lending operations, reform
of corporate governance in developing countries; (ii) undertaken corporate
governance assessments (CGAs) in 8 countries under the auspices of APEC with a
further 12 CGAs from all over the world contemplated in the next 6 months; and
(iii) produced policy papers on corporate governance (including a framework
paper which is near completion), organized or participated in international
conferences and maintained a web site on this topic.

The BCBS circulated in September 1999 a paper that provides guidance on
corporate governance in banks and forms part of an ongoing effort to strengthen
procedures for risk management and disclosure in banks.

Insolvency Regimes

UNCITRAL, IMF, World Bank

The Model Law on Cross Border Insolvency developed by UNCITRAL in
1997 is now under consideration in a number of countries. The IMF published a
report Orderly and Effective Insolvency Procedures in 1999 that
discusses major policy choices to be addressed by countries when designing
insolvency systems. The World Bank is developing a set of Principles and
Guidelines on Insolvency Regimes for Developing Countries, in collaboration
with international organizations and insolvency experts. In parallel, an
assessment matrix is being developed by the Bank for use in pilot
assessments.

Other

Committee on the Global Financial System (CGFS)

World Bank, United Nations

Institute of International Finance (IIF)

The CGFS acts as a central bank forum for monitoring and examining the broad
issues related to financial markets and systems by elaborating policy
recommendations to support central banks in ensuring monetary and financial
stability. The CGFS performs the following tasks: systematic short-term
monitoring of global financial systems; in-depth longer-term analysis of
financial markets; and articulation of policy recommendations to improve market
functioning and promote stability. On November 11, 1999 it released a document
which identifies general principles and more specific policy recommendations
relevant to the promotion of liquid government securities markets.

The U.N. is working on developing basic social principles and the World
Bank, in collaboration with other international agencies, is developing general
principles of good practices in social policies.

The IIF has organized a series of working groups to identify best practices
and to develop standards in a number of areas. These include data standards for
emerging market economies; best practices for financial firms to manage risk
exposure to emerging market economies; and common financial industry
definitions for non-performing loans and criteria for loan classification.

Acronyms

APEC

Asia Pacific Economic Cooperation

BCBS

Basle Committee on Banking Supervision

BCP

Basel Core Principles

BIS

Bank for International Settlements

BSFF

Buffer Stock Financing Facility

CCFF

Compensatory and Contingency Financing Facility

CCL

Contingent Credit Lines

CF

Capital Flows

CFF

Compensatory Financing Facility

CGFS

Committee on the Global Financial System

CHFI

Committee on Hemispheric Financial Issues

CPSS

Committee on Payment and Settlements Systems

CSF

Currency Stabilization Fund

DDSR

Debt- and Debt-Service Reduction

DSBB

Dissemination Standards Bulletin Board

EFF

Extended Fund Facility

FSAP

Financial Sector Assessment Program

FSF

Financial Stability Forum

FSLC

Financial Sector Liaison Committee

FSSA

Financial System Stability Assessment

GDDS

General Data Dissemination System

HIPC

Heavily Indebted Poor Countries

HLIs

Highly Leveraged Institutions

IAIS

International Association of Insurance Supervisors

IASC

International Accounting Standards Committee

IATF

Inter Agency Task Force on Finance Statistics

IC

Interim Committee

IFAC

International Federation of Accountants

IIF

Institute of International Finance

IMFC

International Monetary and Financial Committee

INSOL

International Federation of Insolvency Professionals

IOSCO

International Organization of Securities Commissions

LOI

Letter of Intent

MEFP

Memorandum of Economic and Financial Policies

MFPT

Code of Good Practices on Transparency in Monetary and Financial Policies

MPI

Macro-Prudential Indicator

NAB

New Arrangements to Borrow

OECD

Organization for Economic Cooperation and Development

OFCs

Offshore Financial Centers

PIN

Public Information Notice

PRGF

Poverty Reduction and Growth Facility

PRSP

Poverty Reduction Strategy Paper

ROSC

Report on the Observance of Standards and Codes

SDDS

Special Data Dissemination Standard

SRF

Supplemental Reserve Facility

UFR

Use of Fund Resources

UNCITRAL

United Nations Commission on International Trade Law

WEMD

World Economic and Market Developments

1 Including the International
Accounting Standards Committee (IASC) and the International Federation of
Accountants (IFAC).2 This review built upon the
June 1999 external evaluation of IMF surveillance. That evaluation was
discussed in more detail in the September 1999 Report of the Managing
Director to the Interim Committee on Progress in Strengthening the Architecture
of the International Financial System.3 The FSF Task Force on
Implementation of Standards has recently considered a range of issues
surrounding the implementation of standards that have an important bearing on
the work underway in the IMF and the World Bank.4 See, for example, the Report
of the G-22 Working Group on Transparency and Accountability (October
1998) and the April and September 1999 Interim Committee communiqués.
More recently, the experimental work on ROSCs has been supported by the
recommendation of the G-20 to "undertake the completion of Reports on the
Observance of Standards and Codes ("Transparency Reports") and
Financial Sector Assessments..." (G-20 Finance Ministers and Central
Bank Governors Meeting, Finance Canada Press Release, December 15-16,
1999). Similarly, Western Hemisphere Finance Ministers have recently endorsed
ongoing work on standards and codes. They encouraged members to undertake FSAPs
and committed themselves to support and participate in ROSCs (Joint
Ministerial Statement, February 3, 2000).5 Current participants in the
work of the TFFS include the World Bank, BIS, OECD, European Central Bank,
EUROSTAT, Paris Club, Commonwealth Secretariat, and United Nations Development
Program (UNDP).6 Available at http://www.imf.org/external/pubs/ft/seminar/2000/capflows/index.htm7 The September 1999 Report
of the Managing Director to the Interim Committee on Progress in Strengthening
the Architecture of the International Financial System addressed issues
raised in the discussions of capital account liberalization in greater
detail.8 Countries often undertake
debt exchanges in non-crisis periods as part of normal debt management
practices.9 The review will cover
policies and facilities related to the use of the IMF’s general
resources. It will not deal with the PRGF – a facility administered by
the IMF as a trustee on behalf of members – or with the HIPC Initiative,
both of which have recently undergone substantial reform.